The Canadian dollar strengthened to a nine-day high against its U.S. counterpart on Wednesday as rising stocks and oil prices offset domestic data showing the fifth consecutive monthly decline for home prices.
U.S. stocks rose broadly after U.S. producer price data backed the Federal Reserve’s patient stance on future interest rate hikes.
“Stocks and oil are both at the best levels of the year and that signifies optimism about growth; it’s a tailwind for the Canadian dollar,” said Adam Button, chief currency analyst at Forex Live.
The price of oil, one of Canada’s major exports, rose as U.S. crude inventories unexpectedly fell and an official forecast of crude oil supply growth from the world’s top producer was revised lower. U.S. crude oil futures settled 2.4 per cent higher at $58.26 a barrel.
At 3:37 p.m. (1937 GMT), the Canadian dollar was trading 0.5 per cent higher at 1.3296 to the greenback, or 75.21 U.S. cents, its strongest since March 4.
Gains for the loonie came after U.S. Trade Representative Robert Lighthizer said on Tuesday that the United States is working on a plan to lift tariffs from Mexican and Canadian steel and aluminum.
In domestic data, the Teranet-National Bank Composite House Price Index showed Canadian home prices fell 0.4 per cent last month from January.
Canada’s once-hot housing market has softened since the start of last year, weighed by tighter mortgage rules and five interest rate hikes from the Bank of Canada since July 2017.
Bank of Canada Senior Deputy Governor Carolyn Wilkins is due to speak on Thursday. Last week, the central bank said it expects the Canadian economy will be weaker in the first half of 2019 than it projected in January, and that it was watching developments in household spending, oil markets and global trade.
Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries after U.S. data showed new orders for U.S.-made capital goods in January posted their largest increase in six months.
The 10-year fell 17 Canadian cents to yield 1.758 per cent. On Tuesday, the 10-year yield touched its lowest intraday since June 2017 at 1.728 per cent.